Congress (I) 2014 Manifesto: Right To Entrepreneurship, Retroactive Tax, Banking For All & More

The Indian National Congress, the political party that currently head the governent in power, has a released a manifesto which, from a business perspective, promise to address problems that are its own creation, or points towards work that has remained incomplete in the party’s tenure in power. Download the manifesto here. Some points to note:

1. Right To Entrepreneurship: The manifesto says that the party will bring the poorer classes into the middle class by providing a “basic rights”, which include, along with rights such as Right to Pension, Right to Health, Right to Homestead or Housing, the Right to Entrepreneurship. According to the manifesto, the Right To Entrepreneurship will “protect and assist all those who seek to become entrepreneurs”.

MediaNama’s Take: Note that India’s a terrible country to start a business in: the processes are cumbersome, it’s difficult for startups to raise debt, the same government actually put a 30% tax on angel investment. The country ranks 134th in the world in the ‘Ease of Doing Business’. It’s great that the party intends to improve this ranking to 75, but it doesn’t go into detail of what exactly it intends to do in order to make doing business easier, apart from generic promises like “streamlining the process for starting a business, getting various permits, easing access to credit, streamlining the tax enforcement system, and various other interventions.” Note that the last 10 years have seen an increase in regulation of fledgling businesses, and regulators and lawmakers have created unnecessary red tape. A case in point is the IRDA regulation on web Insurance aggregators, which we had written about here.

2. Business Environment: The Congress (I) has promised to ensure that “India has a globally competitive business and investment friendly environment, and will promote an open and competitive economy, open to global and domestic competition. The rationale behind this, according to the party, is that “Our Current Account Deficit can be financed only by foreign investment, whether it is Foreign Direct Investment (FDI) or Foreign Institutional Investors (FII) or External Commercial Borrowing (ECB) or any other kind of foreign inflow. Hence, there is no room for any aversion to foreign investment.”

In addition: “We will endeavour to create a stable and predictable business environment. We will ensure that the interface between government and industry is simplified and will usher in comprehensive regulatory changes in this regard. This will include optimising the use of electronic platforms and minimising human interface wherever possible. Redundant procedures will be weeded out and the E-biz Project will be implemented across the country, which will ensure ‘single window electronic clearances’ platform for all investors, embracing in its fold all regulatory approvals of the Central and State governments.”

Importantly: “Set up a Regulatory Reform Task Force for a review of all regulatory processes of central government ministries with the intent of repealing unnecessary processes, streamlining the regulatory structures and improving ease of doing business in India.”

MediaNama’s Take: Note that the party has actively hampered FDI in India: the retroactive taxation of Vodafone, after the Supreme Court of India ruled in Vodafone’s favor would have spooked many-a-investor. The mishandling and the corruption around the 2G scam wouldn’t have helped either, and global telecom operators who lost money in this market will probably never return, because the government handed out licenses that were annulled by the Supreme Court of India. The call by Telecom minister Kapil Sibal for social networks to pre-censor content would have also have impacted perception, and painted the picture of an overbearing government. The terrible decision of implementing FDI in multi-brand retail statewise, and stand against FDI in e-commerce, hasn’t helped either.

The Ebiz project is a great idea, and the promise to weed out redundant procedures is something that should have been done much earlier. Too little, too late.

3. Taxation: The manifesto promises the introduction of GST Bills and a new Direct Tax Code Bill in Parliament and ensure that they’re enacted within a year, and ensuring that the unpredictable risk of retroactive taxation is avoided. In addition, “Put out a clear policy on tax treatment of foreign firms and Merger & Acquisitions (M & A) transactions while ensuring that taxes are paid by multinational/ foreign entities in the jurisdiction in which the profits are earned.”

MediaNama’s take: The GST has been a part of many a manifesto, and nothing has come of it. It’s hypocritical of an entity that brought about the risk of retroactive taxation to promise to ensure that the unpredictable risk around it is “avoided”. Note that this is not a promise to remove retroactive tax.

4. Broadband: “We will ensure that all our towns and Gram Panchayats are connected with high-speed broadband connectivity within 18 months.” and “The Indian National Congress will connect all 2.5 lakh Gram Panchayats with high-speed broadband connectivity within 18 months, with a view of improving public delivery mechanism.The vision is to transform governance and service delivery in areas such as health, education and agriculture, and unleash local innovation capacity.”

MediaNama’s Take: Note that the promise made by the party 5 years ago was to connect all villages within 3 years of being elected, but it appears that this is running, all in all, three and a half years behind schedule.

5. Banking: “We will ensure that every citizen has a bank account within the next five years.”

MediaNama’s Take: This would be particularly useful, since it would help streamline payments, and from a digital industry perspective, help facilitate online and/or mobile payments. However, there is no clarity on how exactly this will be implemented. One approach, we guess, would be to mandate the use of bank accounts for usage of government services, linked to Aadhaar. This will probably not be possible now that the Supreme Court of India has said that Aadhaar is not mandatory for government services.

6. Manufacturing: The manifesto says that they will support manufacturing and especially manufacturing for export. “We propose that all taxes, Central and State, which go into an exported product should be waived or rebated. We also propose that there should be a minimum tariff protection so that there is an incentive to manufacture goods in India rather than import them into India.” and “We currently import popular branded hardware in the IT sector. We will give special tax incentives for setting up manufacturing for such products in India.”

MediaNama’s Take: Given that the party that was in power for 10 years, why wasn’t this done earlier?

7. Direct Cash Transfer & Aadhaar: “The Indian National Congress is committed to using the Aapka Paisa Aapka Haath platform for all government programmes. Direct Benefit Transfer will ensure time-bound delivery of benefits at the individual’s doorstep, and remove corruption and leakages.” The party also plans to cover migrant labor under Aadhaar.

MediaNama’s Take: This is probably one way of trying to get everyone to open a bank account. Frankly, this form of redistribution of income is more prone to misuse of funds than even subsidies. On Aadhaar, there are issues that have been raised by the parliamentary standing committee about its setup and implementation which are yet to be addressed, apart from the Supreme Court directive of not sharing Aadhaar data even between government departments without user consent, and issues around making it mandatory for government services.

8. Patents: A patent pool will be created which will ensure that the Indian small and medium enterprises are able to access world-class technology at affordable cost.

MediaNama’s take: We particularly like this idea, but details on how this will be approached would be useful.

9. Key bills:

– Electronic Delivery of Service Bill 2011: “We will ensure the passage of the Electronic Delivery of Service Bill 2011. We will, in accordance with the Bill, work to effectively deliver all public services (like passports, ration cards and driving licenses) electronically.”

– The Right of Citizens for Time Bound Delivery of Goods and Services and Redressal of their Grievances Bill, 2011

MediaNama’s Take: These are important initiatives, and address a key consumer need. We hope that any government which comes to power examines the efficacy of these bills and tables them in Parliament for passing.

10. Disaster Management: We will work to establish a Rapidly Deployable Multi-Protocol Wireless Communication system; interoperable across all the services engaged in disaster management.

11. India Inclusive Innovation Fund: We will ensure effective implementation of the India Inclusive Innovation Fund so that innovative enterprises can profitably, scalably, and competitively engage citizens at the bottom of the economic pyramid. We recognize the need for grassroots innovation and will ensure this initiative is well funded.

MediaNama’s Take: Innovation need to be grassroots based, and benefit to citizens can come from all sorts of businesses, not just those addressing the bottom of the pyramid. Take, for example, mobile phones, which were ill-affordable to begin with, and today, empower billions across the world. The tokenism around addressing the bottom of the pyramid is an unnecessary and avoidable approach.

12. Investment in Science and Tech: “The Indian National Congress will increase the annual expenditure on science and technology to at least 2% of GDP. This has to come from both government and industry. Steps will be taken to encourage the corporate sector to invest in Research and Development.”

MediaNama’s Take: The idea, we hope, is to create an incentive for industry to invest in R&D, and not enforce it, like the way this government has enforced mandatory CSR.

What’s Missing?

1. References to freedom of expression, and burgeoning control over the Internet, which hampers freedom of speech.

2. Passing of India’s Privacy law, given that Aadhaar operates in a situation where there isnt a privacy law in India.

3. Addressing the dichotomy of having both Aadhaar and NPR

4. Removal of retroactive taxation

5. Fixing India’s draconian IT Act and IT Rules: Intermediary liability brings in unnecessary cost of doing business for intermediaries.

6. Policy to support the growth of the telecom sector, which has suffered since the 2008 auction of spectrum

7. Initiatives to support the growth of mobile banking and payments, which will help bank the unbanked.